There doesn't look to be much here that we don't already produce in spades.

Maybe they've opened the door to dirt-cheap Peruvian labour?

Interestingly.......

Notable illegal exports of Peru include cocaine and counterfeit money. Peru is the world’s largest producer of cocaine alongside Colombia (the two countries keep on overtaking each other). It is also considered one of the world’s most sophisticated producers of counterfeit money, including dollars that end up in the USA.

There doesn't look to be much here that we don't already produce in spades.

Maybe they've opened the door to dirt-cheap Peruvian labour?

Interestingly.......

Notable illegal exports of Peru include cocaine and counterfeit money. Peru is the world’s largest producer of cocaine alongside Colombia (the two countries keep on overtaking each other). It is also considered one of the world’s most sophisticated producers of counterfeit money, including dollars that end up in the USA.

You are implying that Australian trade negotiators are incompetent and that you and your mates from your local pub could do a better job.

You only just realised this now?

What I am actually saying is that given our penchant for rushing to blindly sign agreements that keep turning out to be contrary to Australia's interests, one is justified in at least suspecting that this will yet again be the case. Until I see evidence to the contrary.

You are implying that Australian trade negotiators are incompetent and that you and your mates from your local pub could do a better job.

You only just realised this now?

What I am actually saying is that given our penchant for rushing to blindly sign agreements that keep turning out to be contrary to Australia's interests, one is justified in at least suspecting that this will yet again be the case. Until I see evidence to the contrary.

The answer to that is that you and your mates from your local pub should enter the political arena, get elected, and act out your fantasies.

You are implying that Australian trade negotiators are incompetent and that you and your mates from your local pub could do a better job.

You only just realised this now?

What I am actually saying is that given our penchant for rushing to blindly sign agreements that keep turning out to be contrary to Australia's interests, one is justified in at least suspecting that this will yet again be the case. Until I see evidence to the contrary.

The answer to that is that you and your mates from your local pub should enter the political arena, get elected, and act out your fantasies.

Whining, blithering, and blathering never solved issues.

Complaining only occurs once one understands that an issue actually exists in the first place. Call me when you reach this stage.

You are implying that Australian trade negotiators are incompetent and that you and your mates from your local pub could do a better job.

You only just realised this now?

What I am actually saying is that given our penchant for rushing to blindly sign agreements that keep turning out to be contrary to Australia's interests, one is justified in at least suspecting that this will yet again be the case. Until I see evidence to the contrary.

The answer to that is that you and your mates from your local pub should enter the political arena, get elected, and act out your fantasies.

Whining, blithering, and blathering never solved issues.

Complaining only occurs once one understands that an issue actually exists in the first place. Call me when you reach this stage.

Lefty wrote:This is a political stage for discussion of political topics.

What's your opinion of the newly-signed Australia-Peru FTA?

I support all FTAs because they are in Australia long-term economic interest.

Australia's economy accelerated after Tariffs were reduced. Australia's problem is that Australian industrialists do not have an export mind-set and therefore will never become internationally competitive by economies of scale despite the advantage of having cheap international transport by backloading on ships which would otherwise leave empty to return to their port of origin.

Tariffs have never benefitted the public in general and their effect is highest on the poor. Unfortunately, Australians who suffer from intellectual poverty believe tariffs are a magic tool to cure all economic ills.

This general tariff reduction program was extended in 1991 as the key plank in a new initiative entitled Building a Competitive Australia. This announced the phase down of general tariff rates over four years from 1992 to 1996 from 15 and 10 per cent to a single rate of five per cent. In addition, tariffs on PMV would be reduced to 15 per cent by the year 2000 and for TCF, quotas would be terminated in 1993 and tariffs phased down to a maximum of 25 per cent by the year 2000. These tariff cuts were to be accompanied by measures to enhance labour market and training programs and to exempt inputs to goods production from wholesale sales tax.

The above announcements in 1991 were accompanied by some of the strongest statements made by Australian politicians in favour of trade liberalisation. Interestingly they were made at a time of economic recession and high unemployment. Prime Minister Hawke stated:

Mr Speaker, the most powerful spur to greater competitiveness is further tariff reduction.

Tariffs have been one of the abiding features of the Australian economy since Federation. Tariffs protected Australian industry by making foreign goods more expensive here; and the supposed virtues of this protection became deeply embedded in the psyche of the nation.

But what in fact was the result?

Inefficient industries that could not compete overseas; and

Higher prices for consumers and higher costs for our efficient primary producers. Worse still, tariffs are a regressive burden-the poorest Australians are hurt more than the richest.(16)

Treasurer Keating was equally damning of the tariff:

The package of measures announced today ends forever Australia's sorry association with the tariff as a device for industrial development.

By turning its back on tariffs, Australia will be further propelled in its quest for international trade and efficiency, a search begun with the opening up of the economy in 1983 when we floated the dollar and abolished exchange controls.

As in all nations before it, the pursuit of trade and competition has instilled in Australia a thirst for greater efficiency at home and a larger dominion abroad.(17)

The recession continued through 1992 and Prime Minister Keating introduced a range of measures to facilitate business growth and generate employment. These were outlined in his One Nation statement on 26 February 1992 and the Investing in the Nation statement on 9 February 1993. Measures announced in these packages included accelerated depreciation for plant and equipment, reduction in the company tax rate, measures to facilitate major projects and a number of incentives to encourage exports and innovation, as well as a range of initiatives to assist training and job creation. These positive measures no doubt helped to detract attention from the critics of trade liberalisation and the across-the-board progam to reduce tariffs announced in 1991 continued to operate as scheduled.

By the end of the Keating Government in 1996, most tariffs had been reduced to five per cent and the scheduled reductions in tariffs for PMV and for TCF up to the year 2000 are continuing as planned. The Howard Government's commitments concerning tariff assistance for these two industries beyond 2000 and also Australia's long term commitment to free trade under APEC are discussed in Industry Policy in Australia, September 1999.(18)

I support all FTAs because they are in Australia long-term economic interest.

Even when they have been clearly demonstrated to not be in Australia's interest? If something is in Australia's interest then I will support it but it's pretty silly to make blanket statements - that our elite policy makers share your black and white view of trade and it's effects is part of the reason we are in trouble. In particular, signing agreements where there is little or no reciprocation is NOT in Australia's interests and it's difficult to fathom why someone would insist that it is.

Australia's economy accelerated after Tariffs were reduced.

Australia's longest and strongest period of economic growth occurred when tariffs were solidly in place, during the Keynesian era. I'm not arguing that they were the determining factor in the strong growth, just noting that long periods of strong growth have occurred with tariff regimes in place.

It is overly simplistic to claim a direct causal link between strong growth and tariff reduction.

The time frame you are giving here exactly matches the normal recovery from the last severe recession Australia experienced and the subsequent rise of private sector credit growth as a prime driver of the economy. It would be difficult to measure the exact effect of tariff reductions over this period since the economy would have accelerated anyway as part of recovery from a downturn and then being ultimately supercharged by the process of the private sector indebting itself to the eyeballs. Without this process, reducing tariffs would have made little difference to the economy.

Diversion as an example: did you know it's a myth that wattle flowers cause hay fever? Everything thinks they do because about the time everyone starts sneezing, the landscape comes alive with small trees covered in brilliant yellow blooms. They're so obvious to all that they must be the cause, right? Wrong. Wattle pollen is large and heavy and requires insects to pollinate, it's far too big to drift on the wind. The real cause is the billions of tiny, dull and completely inconspicuous grass flowers, whose tiny pollen grains drift on the wind in countless numbers that occur at the same time as the wattle.

One gets the blame because it is obvious to all while the real culprit is so inconspicuous that hardly anyone notices. Long-winded way of saying that correlation does not automatically equal causation.

Tariffs have never benefitted the public in general and their effect is highest on the poor.

The poor are typically poor because they are without employment. Signing one-sided FTA's does little for employment. Has it benefitted thousands of Australian auto and related workers? Are they better off because we signed agreements that gave foreingers unfettered access while ours was hampered by the same agreements? Will the cost of cars to the general public really fall dramatically now?

HBS Guy wrote:I am asking for our tariffs to match those of our trading partners. The FTAs are a joke because they do not benefit Australia. Who has the US–Australia FTA mainly benefitted? Clue, begins with ‘U’

You wouldn't think it would be too big of an ask would you? To require that an agreement create equal footing rather than simply assume that foreign competition being given almost unrestricted access to our markets will always benefit us even when they do not reciprocate. To sign such agreements is madness! For sure, the "benefits" of the original US-AUS FTA have flowed very largely one way - and it ain't our way!

Trade is good for us when it is good for us and not good for us when it is not - a ridiculously simple fact. But this fact is lost on those who regard trade in the same manner as a religion, who hold an unshakable belief that all trade is automatically good, regardless of the outcome. In these people's minds, all bad outcomes can be ignored as though the reality of them did not exist.

Trade is meant to serve a purpose - mutual benefit. If it does not serve this purpose then it is pointless for those on the losing side of the equation.

This is an interesting one. I'm skeptical that they can be raised by any great amount without the economy ending up derailed - this is the reason why.

The long period of low interest rates in a deregulated credit environment has helped household debt swell to levels without precedent - which in turn requires continued low interest rates for the cycle to continue because the bulk of the debt is long term (mortgage debt) and will take decades to work it's way through the system.

Small and well-spaced interest rate rises have done little to derail the US recovery, he says

Australia and the US are not comparable in this regard. Firstly, the US household sector deleveraged to a reasonable extent in the wake of the GFC while Australia's household debt continued to balloon. So a good chunk of the debt was reduced by the time US interest rates started rising - from a policy rate of just above 0% to the current 1% - still a little lower than ours.

Second, Australia's household debt is based on a system that is fairly unique - the variable rate mortgage. When policy interest rates fall, the cost of variable rate mortgages (roughly 90% of the mortgage stock) typically falls to at least some extent. This - I believe - made Australian monetary policy one of the most effective in the world when the GFC hit. Other central banks may have slashed policy rates but it was only new debt that became cheaper, with existing loan rates usually being fixed and no one in their right mind wanting to borrow money no matter how cheap it was made. But in Australia, exisiting debt becomes cheaper as well.

But this can be a two-edged sword. It means existing debt also becomes more expensive when rates rise. There can be an option to lock for a certain period but by the time most people make that decision they - as consumers - are already worse off.

In short, I feel the RBA has limited scope to raise policy rates without dampening and ultimately stalling the economy but if they try I guess we'll find out if that's right or wrong.

UK's case exemplifies the effect of tariffs as a percentage of government revenue which rose from 10% in 1920 to 25% currently which reflected the decline of UK manufacturing and UK's economic wellbeing in comparison to other countries.

Lefty, please explain how tariffs have helped British industry and British economics?

I have no formal training in macro-economics. However, I took a strong interest in the subject about 10 years ago and maintained that interest for years, corresponding daily with economists, market researchers and those who worked in the high levels of finance. So while I'm far from being an expert, I think I have at least a rough, basic idea of what makes things tick.

I get the sense that you are simply grasping at anything you think supports your argument and posting things you don't understand because they look good to you. Without contextual information many of the stats you have posted are likely meaningless on their own. You posted a list of dismal places with higher tariffs and then posted a list of places with few tariffs - do you understand that some of those places are equally dismal?

You're using places like Namibia and Botswana as poster boys - do these names not mean anything to you? Would you go there for a holiday? Chile is a poor country. Georgia is a strife-ridden former Soviet republic. Hong Kong is not a country but a city state.

Such comparisons are meaningless without context.

When did the UK "decline in comparison to other countries" during that time period? What point are you trying to prove with those charts? That a decline in the British Pound versus the US Dollar shows that they were worse off compared to everyone else? Do you understand that large global events over such time periods can have effects - such as the abandonment of the Bretton Woods system which had pegged the major currencies - including the British Pound - to the US dollar at a fixed rate and in turn to physical gold? You understand that manufacturing-led economies often like to have a lower-valued currency because this tends to favour exports?

You're just bundling up a bunch of places, some of which are poverty-stricken with high tariffs, some of which are poverty stricken with no tariffs, some of which have no meaningful industrial base but are financial centres instead, some of which have economies based on international organised crime, some of which protect their industries with non-tariff means....it doesn't really mean anything.

Again - trade is good when it benefits both parties overall and not good when it doesn't. You cannot apply a black and white blanket rule and expect everyone to benefit.

Lefty, it's very evident you have no qualifications in economics, whereas I have a degree in engineering and a Bachelor of Commerce degree majoring in economics. I have worked in engineering because it was more lucrative than relatively low-paid and few positions in economics.

I recommend you read the full article below on the Brigden committee to understand how the effects of tariffs are determined.

Whether or not tariffs are an appropriate means of stimulating national manufacturing depends on the state of economic development of the nation, and the economic circumstances of the time. Furthermore it is arguable that a low and falling exchange rate is a better stimulant than tariffs, which also have undesirable effects.

You should read the full article on the Brigden Committee report of 1927 which recommended tariffs on manufactured goods at that time when Australia's exports were wheat, wool, gold, and other primary products. The conclusions at that time were that free trade would force labor out of manufacturing into the primary industry and the increase in the supply of primary industry goods for export would force down prices.

In fact, I did an assignment on that subject and received a 95% mark. I analyzed the committee's decision and demonstrated that it was correct, rational and appropriate in its determination of the prospective effects of tariff reductions given the national and international economic circumstances of that time. From the 1920s the world was moving toward free trade and Australia was being pressed by UK to accept free trade. UK was Australia's major source of manufactured goods in the 1920s and 1930s and for a long time after until the 1970s.

... II Brigden’s Case for ProtectionThe nature of Australia’s export and import trade gave rise to the importance of thequestion of tariff protection as an economic policy. Australia’s exports mainlyconsisted of raw products of pastoral, agricultural and mining industries. On the otherhand, her imports were primarily manufactured goods. Consequently, the debate wasconcerned with the protection to manufacturing industry.As a preview, it is worth summarising some of the protectionists arguments in the1920s. In order to achieve as large a national income under free trade as underprotection, it was necessary to expand production elsewhere to compensate for theloss of protected manufacturing output. This would necessarily mean the expansion ofoutputs in export industries. They were the primary goods producing industries whichwere suffered from the cost of protection. These industries were supposed to havebeen experiencing diminishing returns. Any further attempt to expand their outputwould have resulted in increasing cost. Furthermore, Australia was producing asubstantial proportion of the world supply of primary goods such as wool and wheat.Any further increase in the Australian supply of these commodities would haveundoubtedly depressed the world prices of those commodities. Protectionists thusargued that the free trade policy would shift the terms of trade to the disadvantage ofAustralia. Thus the expansion of the manufacturing industry under protection wasseen as a viable option which would avoid this unfavourable outcome (Anderson,1938).The other side of the argument was that tariff had the effect of shifting distribution ofincome in favour of labour, supporting a larger population. Under free trade, theconcentration would be on the production of primary goods which would producenational income primarily absorbed in land rent. The extension of production into1930s Australia. The results provide a more formal assessment of the impact of tariffsduring that period and throw some light on the debate on the efficacy of protectionduring the 1930s...

Yes - this is an advantage when it comes to gaining a basic, factual understanding of macroeconmics. You do not start with any pre-conceived notions that have been taught to you, which are typically based on dogma that does not reflect any actual real-world functioning.

Professor Mitchell, Professor Wray et al - while holding extremely high formal qualifications in economics and related fields themselves - appear to be correct......a formal degree in economics-based subjects can be a serious impediment to a proper understanding of how economies actually function.

If you want to understand how things actually function as opposed to how they often alleged to function as taught formally, you will need to do a significant amount of un-learning.

I'm unsure of the point you're trying to make regarding manufacturing output - tariffs have broadly declined as advanced world manufacturing output has declined. A casual observer would likely conclude that not only has the diminishing of tariffs failed to prevent the slide in advanced world manufacturing, it may actually be a significant cause.

I remain somewhat incredulous that you held up a series of nations as shining examples of low/zero tariff success, seemingly without realising just how shit-awful some of those places are for many of the people living there. Did your formal degree teach you that you can't just note that a country has low or no tariffs in place, divide the output by the population and then conclude that the place is a starring success? What would lead you to conclude that the fruits of GDP are shared remotely equitably? Some of your poster boys hold rankings on the world poverty index. Some of them also feature highly on Harvard's economic complexity/simplicity scale......at the wrong end of the scale. Btw, Australia is now down there among them on the economic simplification scale. Only a fool would conclude that this is a good thing.

I repeat - trade is good when it is good and bad when it is bad. Insistence that it is automatically 100% one or the other is ideology, not facts.

And government is engaging in strategic planning - their eventual goal is the total elimination of all barriers to trade in the belief that the one-world economy is coming, where nation-states are irrelevant except in name and all power will lie with global markets. Endless evidence that this is garbage does not appear to dampen their enthusiasm, especially in Australia.

Lefty wrote:I remain somewhat incredulous that you held up a series of nations as shining examples of low/zero tariff success, seemingly without realising just how shit-awful some of those places are for many of the people living there. Did your formal degree teach you that you can't just note that a country has low or no tariffs in place, divide the output by the population and then conclude that the place is a starring success? What would lead you to conclude that the fruits of GDP are shared remotely equitably? Some of your poster boys hold rankings on the world poverty index. Some of them also feature highly on Harvard's economic complexity/simplicity scale......at the wrong end of the scale. Btw, Australia is now down there among them on the economic simplification scale. Only a fool would conclude that this is a good thing.

IMO the only meaningful measure of economic growth is the growth in the bottom quintile. That cohort is the one that is most in need of growth, but current economic measures never state this explicitly. By not highlighting this, it masks growth in inequity.

If we were to measure this, we would find incomes in the bottom quintile have definitely been in recession in Australia at least twice in the past 25 years, and perhaps as many as five or six times. It's only the obscene growth in incomes in the top quintile over that time that has masked this.

You miss some aspects of reality which you fail to consider in your determinations.

1. Very often low priced imports which sell retail for up to 6 times ex-works price add more to the economy than locally manufactured goods which sell fewer at a higher price.

Yes, we all understand that we can buy more cheap junk for our buck when we are flooded with such product. Whether or not this actually adds more to the economy overall is a macro-economic question though, not a micro-economic one. A "big picture" question. As HBS Guy points out, importing tends to be inferior to local production when it comes to job creation. If it is allowed to supplant local production altogether in a complex area such as vehicle manufacturing, then not only do we lose local jobs, we lose a whole raft skills, knowledge and specialised capital - we become economically more simplified, and forever reliant on others for an increasing range of needs. Local innovation becomes more difficult when you are on a drive to simplify your local economy as much as possible.

Then there is the matter that each dollar spent on imports flows out of the economy. Take cars for example. Every dollar Australians spend on cars will now forever flow out of the economy. With the local industry deliberately destroyed, the purchasing of cars will be a net drain on growth.

The more heavily reliant on imports we become for our needs, the more growth flows out of the economy through the external sector, which then needs to be replaced. The replacement of choice is the expansion of private sector debt.

To be sure, something is not bad simply because we imported it. Much of the heavy equipment for the now defunct mining boom was imported, which allowed us to expand our capacity for raw material outputs. But then we also have to ask "who owns Australia's mining sector?". The answer is, mostly foreigners. Meaning a good deal of the earnings are repatriated overseas.

As usual, the issues may be complex. But the question is always a simple one - will a trade deal benefit us overall or not? If the answer is not, then we don't want it.

2. Markets are rapidly changing to online sales with direct delivery from overseas. This is driving down prices which further detracts from local manufacturer ability to compete.

Yes - and the extent to which this occurs is largely a political and ideological choice. Just like whether or not to destroy our ability for mechanical engineering.

The world is becoming more complex, multi-colored and multi-faceted,

Yes, and this has much potential to benefit us all - if properly managed.

while you still view it as simple and white, minus the black and color.

I tend to think it is you that subscribes to such a veiw with your embrace of unfettered trade as a panacea, which it is not.

Methinks denizen Lefty is mistaking the failure of the Capitalist system as being caused by free trade.

Australia's economic problem currently is that the economic belt is tightening and bringing together the middle class and lower classes by squeezing the differential between wage rates such that there is hardly any premium for education and skill.

Society is moving back toward serfdom where the master class owns all the factors of production and the serfs are merely factors of production.

The minimum wage in Australia is not far below the average wage in the UK.

Crocodile on OzPol thinks corporate tax cuts are a panacea. He also thinks retained earnings are cash available for investment Cash flow is what determines investment. Retained earnings are just an accounting thing, not cash.